Analyzing the State Budget for FY 2018

July 21, 2017

Analyzing-the-State-Budget-for-FY-2018

OVERVIEW

At this point in the process, the Fiscal Year 2018 (FY 2018)
state
budget looks a lot like the FY 2017 budget. After adjusting for
inflation, the proposed total bottom line is lower than that of the FY
2017 budget and we see essentially status-quo funding levels in each
major category: Education; Local Aid; Human Services; Environment and
Recreation; Law & Public Safety; Infrastructure; Housing; and
Economic Development.

One major area of the budget remains in limbo--MassHealth, the
Commonwealth’s Medicaid program that comprises about
a quarter
of state spending. (While MassHealth is about 40
percent of the total budget, much of the cost of the program is paid by
the federal government.) At the beginning of the budget process, the
Governor identified a major challenge facing the MassHealth program:
cost shifting from private sector employers onto the state MassHealth
program as a result of more private sector employees not receiving
health care from their employers. To address this cost shifting and
help to
stabilize the finances of the state MassHealth program, the Governor
proposed an assessment on employers that don’t meet certain
thresholds for providing health insurance for their employees. That
assessment would have raised $300 million in revenue in the first year
and $600 million or more in future years. After the House and Senate
embraced scaled-down versions of the assessment, the Governor proposed
to the Conference Committee a new plan that would raise $200 million a
year (for only two years) and achieve savings through several
strategies, including denying MassHealth eligibility to non-disabled
adults who could either enroll in ConnectorCare or employer-sponsored
insurance, which have higher out-of-pocket costs and lower benefits.
The budget enacted by the Legislature included the version of the
employer assessment recommended by the Governor, but not the new
changes to MassHealth or the commercial health insurance market he
proposed during the Conference process. When signing the budget, the
Governor used his authority to send back sections with proposed
amendments to ask the Legislature to hold hearings on and adopt his
proposed changes to MassHealth along with the employer assessment.
Thus, the current version of the budget does not resolve how to address
the fiscal pressures on MassHealth caused by the cost shifting that
result from more private sector employees not receiving health care
from their employer.

The budget uses a conservative revenue estimate for FY 2018, $749
million below the original estimate. It relies, however, on significant
amounts of temporary revenue and savings to achieve balance: $125
million from accelerating the receipt of sales tax revenue; about $200
million from assuming that money will be left over at the end of FY
2018 in various accounts and can be reallocated; depositing $51.5
million less in the state’s Stabilization (“Rainy
Day”) Fund than current law would require (the budget would
change the law); and providing $128.8 million less in funding for the
State Retiree Benefits Trust than is called for by existing law While
the budget enacted by the Legislature also provided $94.1 million less
than needed for unavoidable costs (as calculated by the Administration)
in several accounts, the Governor has proposed additional funding for
those accounts (and made vetoes to cover those costs).

This Budget Monitor
describes the funding levels and major initiatives in each area of the
budget, incorporating the numbers in the budget enacted by the
Legislature and the vetoes by the Governor. It also provides
comparisons to FY 2017 funding levels, historic funding levels back to
2001, and proposals earlier in this year’s process where
relevant. For more comprehensive data on historic spending
levels for each line item and category of the budget, see
MassBudget’s Budget
Browser. For additional detail on programs in the state
budget that affect children see our Children’s
Budget. Over the coming weeks and into the fall the
Legislature will decide on whether to overturn
(“override”) or accept the Governor’s
vetoes and whether or not to agree to his proposed amendments and
related supplemental legislation.

Quality early education helps prepare our young children for
success in
K-12 education and allows them to thrive more generally. Early
education is also a critical work support for parents with young
children, by offering safe and reliable care for kids while parents
provide for their families.

The Fiscal Year (FY) 2018 General Appropriation Act (GAA) signed by the
Governor allocates $574.3 million to early education and care. The GAA
includes $2.7 million in vetoes made by the Governor to early education
programs. The total amount of early education funding in the GAA is a
small increase of $6.7 million (1.2 percent) above current FY 2017
levels, less than the expected inflation rate. The funding amount in
the GAA is also below what was approved by both the House and Senate
before estimated revenues for FY 2018 were reduced.

There have been significant long-term cuts in early education and care
since state tax cuts in the late 1990s and early 2000s. Funding for
early education and care in the FY 2018 GAA is $168.6 million (22.7
percent) below what was available in FY 2001, adjusting for inflation
(see chart below).

The FY 2018 GAA provides $222.1 million for
Supportive and TANF Child
Care, $2.7 million (1.2 percent) above current FY 2017
levels, but
slightly below what both the House and Senate approved in their FY 2018
budget proposals. Supportive and TANF Child Care provides subsidies to
children under the care of the Department of Children and Families and
those receiving Transitional Aid to Families with Dependent Children
(limited cash assistance along with work training programs for
low-income families).

The FY 2018 GAA provides $255.4 million for Income
Eligible Child Care,
$2.9 million (1.2 percent) above current levels. Income Eligible Child
Care provides subsidies for low- and moderate-income families not
eligible for other child care assistance. With insufficient funding to
meet child care needs across the state, the waitlist for these
subsidies contained nearly 26,000 kids in May 2017. The FY 2018 GAA
does not include specific funding to reduce the waitlist, but does take
other limited steps to expand access to early education.

The FY 2018 GAA includes $15.0 million for salary increases and
professional development for early educators through a new line item,
Center-Based
Child Care Rate Increase. This amount is $2.5 million more
than what was available in a similar account (Early Education and Care
Provider Rate Increase) in FY 2017. However, it is $5.0 million less
than what the House approved for FY 2018. Salary and benefit increases,
along with professional development for early educators, are key
components of improving the quality of services available for our young
children.

Collectively in the FY 2018 GAA, funding for Income Eligible Child Care
and salary increases for early educators is $270.4 million, which is
$5.4 million (2.1 percent) above current levels, roughly in line with
inflation. It is almost certain that significant waitlists for early
education and care services will persist through FY 2018. This will
limit the ability of children and families, including those with acute
needs, to access this support.

The Governor vetoed the $200,000 that the Legislature
provided in the FY 2018 GAA for the Commonwealth
Preschool Partnership
Initiative. This program helps existing early education
providers,
including school districts, expand access to services, particularly for
3-year-olds. The Senate had proposed $15.1 million in support for this
program to help increase the availability of child care, building off
the federally-funded Preschool Expansion Grant (PEG) model in several
cities. For more detail, see
Analyzing the Senate Ways and Means
Committee Budget for FY 2018.

In March, the Governor announced a planned 6.0 percent increase in the
rates paid to early education providers by the state for subsidized
child care for FY 2018, at a cost of $28.6 million. At the same time,
the administration announced that approximately 1,100 additional kids
would be able to be served through newly issued vouchers. This policy
announcement assumed that early education programs would at least
receive the funding amounts outlined in the Governor’s FY
2018 proposal, including a $7.0 million rate reserve (below the $15.0
million contained in the GAA), and that significant unused funding
would be carried over from FY 2017.

The announced rate increases and additional subsidies are largely the
result of repurposing funds that were already approved for FY 2017 that
would otherwise revert to the General Fund. This surplus developed due
to implementation of a new early education financial management system.
Savings have been achieved due to stricter enforcement of policies and
regulations and increased monitoring, with excess funds identified in
this process then being available to reinvest into the rest of the
early education system. Some surpluses also developed as a result of
the underuse of some contract spots in early education centers. It
appears that some surpluses in early education and care caseload
accounts will continue in FY 2018.

An Outside Section of the FY 2018 GAA, like the versions approved by
the Legislature, authorizes carrying over these unused child care funds
from FY 2017 into FY 2018. The FY 2018 GAA would use the surplus for
several purposes, including increasing rates paid to providers, but
also maintaining access to child care vouchers and ensuring more kids
remain eligible for a full year of services. All of these measures are
consistent with the Governor’s March announcement.
The amount of the carryover is projected to be sufficient for the
Department of Early Education and Care to enact the 6.0 percent rate
increase proposed by the Governor for FY 2018.

In FY 2017, funding from several early education and care accounts was
merged into a new Quality
Improvement line item. In FY 2017, Early
Childhood Mental Health Consultation Services was included
with Quality
Improvement. After two vetoes by the Governor, the FY 2018 GAA includes
$31.3 million in support for these line items, $1.1 million (3.5
percent) below current FY 2017 levels.

For a complete list of the Governor’s vetoes in
early education and care programs, see the chart below.

For information on funding for early education programs going
back to
FY 2001, please see MassBudget’s Budget Browserhere.

K-12 Education

Providing an excellent education to all children in
Massachusetts
supports future generations in the Commonwealth while contributing to
our economy over the long term. Chapter 70 education aid is the main
program for delivering state support to local districts across
Massachusetts, and ensuring that schools have sufficient resources to
provide the necessary services to all students. For further background
on the state’s education funding system, see Demystifying
the Chapter 70 Formula.

The Fiscal Year (FY) 2018 General Appropriations Act (GAA) increases Chapter 70 Aid by
$118.9 million (2.6 percent) to $4.75 billion. This increase is roughly
the same as the 2.6 percent ($116.1 million total) increase in FY 2017,
and largely follows what was approved by the House in their FY 2018
budget.

The FY 2018 GAA Chapter 70 proposal includes a modest step to implement
recommendations made by the Foundation Budget Review Commission (FBRC)
in 2015. The Commission found that according to the state’s
estimate of what it takes to educate children (called the
“foundation budget”), school districts are
significantly under-resourced. The FBRC noted that current underfunding
reduces the capacity of schools across the state to provide services to
help all children succeed.

The foundation budget is based on estimated costs for each element of a
school budget as determined in the Education Reform Act of 1993 and
adjusted mostly for inflation since then. The FBRC found that the costs
in the formula fail to reflect actual costs in several areas,
especially employee health care and special education. The FY 2018 GAA
Chapter 70 allocation takes modest steps to address one of these
problems. It contains an increase to the foundation budget rates of
between roughly 8 and 19 percent, depending on grade level and student
category, for employee benefits, the school spending category that
includes health care.

The FY 2018 GAA includes support for districts that receive less
funding as a result of the recent changes to the student poverty
measure (for background on this shift, see Counting
Kids at School: 6 Steps to Better Numbers and Direct
Certification for School Meals: Feeding Students, Counting Kids,
Funding Schools. This provision sets aside $12.5 million in
Chapter 70 funds for transitional support to roughly 15 school
districts. The Department of Elementary and Secondary
Education (DESE) released a report in February outlining how to improve
the process of direct certification for free meals and counting
economically disadvantaged students. It recommended several steps
including improvement of matching processes and expansion of outreach
efforts to enroll families in assistance programs. It also led to a new
task force studying the unique issues of supporting immigrant and
refugee students. This task force is currently undertaking work that
could inform the FY 2019 budget.

The FY 2018 GAA Chapter 70 proposal also reflects a small annual
inflation factor of 1.1 percent and a negligible increase of 0.1
percent to statewide enrollment. Finally, it guarantees a minimum
increase of $30 per student for districts that would not otherwise
receive increased aid. This minimum aid increase results in roughly $6
million in additional aid. Because this minimum is provided regardless
of local financial need, it tends to direct funds to relatively
affluent districts.

Before signing the FY 2018 GAA, the Governor vetoed $7.3 million in
total from K-12 grant programs, primarily dedicated funding for local
programs. As part of those vetoes, the Governor cut $200,000 from Afterschool
and Out-of-School Time Grants. This funding would have
created grants to increase access to high-quality afterschool
opportunities, and a data-sharing pilot initiative helping school
districts collaborate with community-based providers in evaluating the
outcomes of afterschool programs.

The FY 2018 GAA provides $847.1 million to the School
Building Authority (MSBA) to support district construction
and renovation projects across the state. This amount is $12.4 million
(1.5 percent) above current FY 2017 levels. This amount, however, is
$14.5 million below what was included in the prior FY 2018 budget
proposals, due to a lower estimate of available sales tax revenue that
supports the MSBA.

The FY 2018 GAA provides $80.5 million to Charter
School Reimbursements, in line with current FY 2017 levels.
When fully funded, this program is intended to reimburse 100 percent of
outgoing student funding in the first year and 25 percent of this
amount for each of the following five years. However, according to
recent projections from DESE, the FY 2018 GAA funding level would only
support about half the amount called for by the formula, leaving a
$79.0 million gap. This gap has increased from $56.1 million in FY
2017, as additional charter school seats have been added and districts
claimed more reimbursements from the fund. Additional resources have
not been allocated to meet rising demand. For additional detail on
charter school funding, recent proposals to alter the reimbursement
system, and the impact of recent underfunding, see
Charter School Funding Explained.

The FY 2018 GAA provides $281.2 million in support for the Special
Education Circuit Breaker, $4.0 million above current levels,
but below what had been provided in the Senate’s FY 2018
proposal. The circuit breaker reimburses school districts for a portion
of their costs for educating students with severe disabilities.

FY 2018 GAA moves the administration of Inclusive
Concurrent Enrollment from DESE to the Department of Higher
Education, and assigns it a new line item (7066-9600).

For a complete list of programs vetoed by the Governor in the FY 2018
GAA, see the table below.

For information on funding for all education programs going
back to FY
2001, please see MassBudget’s Budget Browserhere.

Higher Education

Higher education helps the people of our state contribute to
their
communities and gain the skills to succeed in a knowledge-driven
economy. Our public higher education institutions – including
the University of Massachusetts (UMass), the state universities, and
our community colleges – educate a majority of Massachusetts
high school graduates who go on to college. Graduates from public
higher education are also more likely to stay in Massachusetts after
graduation, contributing to our state economy over the long term.

The Fiscal Year (FY) 2018 General Appropriations Act (GAA) allocates
$1.16 billion to higher education, which is effectively level with (0.1
percent above) current FY 2017 levels, and behind the expected
inflation rate. This amount is also $41.2 million (3.4 percent) below
what the Senate allocated for FY 2018 and $11.6 million (1.0 percent)
below what the House approved in its FY 2018 budget.

A highly educated and skilled workforce is a critical part of
strengthening and sustaining the Massachusetts economy. Looking over
the longer term, the amount of funding in the FY 2018 GAA would be
$207.6 million (15.1 percent) below what was available in FY 2001,
adjusting for inflation (see chart below) and even further below
historical levels when accounting for enrollment growth over this
period. These challenges contributed to the doubling of tuition and
fees between FY 2001 and FY 2016. For additional detail on these
historical trends, see
In 16 Charts: Higher Education Funding in
Massachusetts.

The table below details appropriations to each of the three
campus
types (UMass, state universities, and community colleges). MassBudget
totals make the following adjustments in order to facilitate more
accurate year-to-year comparisons:

Include
collective bargaining
and other campus specific programs. MassBudget adds
collective
bargaining accounts and initiatives located at particular campuses,
funded through separate line-items, to their respective campus totals

Subtract
tuition remission. Since 2001, different policies have
dictated when
public higher
education campuses must send different categories of tuition revenue
back to the state General Fund. When higher education revenue is sent
back to support the state budget, it is not available for campus
operations and has the same effect as reduced state funding.
Conversely, under rules in effect in FY 2018, UMass will keep all
tuition revenue from both in-state and out-of-state students. To
provide more accurate comparison of state support to campuses over
time, MassBudget deducts tuition revenue sent back to the state from
the direct appropriations to each campus type. For details on the
varying policies at different campuses, see MassBudget’s
Budget Browser section for Higher Education.

The FY 2018 GAA funds University
of Massachusetts line-items 0.5
percent above current levels, and below what the House and Senate
proposed for FY 2018. This FY 2018 budget also proposes flat funding
for State University
line-items (0.1 percent below current FY 2017
levels) also below what each branch of the Legislature allocated.
Finally, Community
College line-items also receive a negligible
increase of 0.5 percent, and fewer resources than the House or Senate
included in their FY 2018 budgets.

Level funding of public higher education all but guarantees that
further increases in tuition and fees will continue across UMass, state
universities, and community colleges in FY 2018. In FY 2017, with
similar small increases or declines, tuition and fees rose by 6 percent
at UMass and 5 percent at state universities and community colleges.
UMass has recently announced a 3 percent tuition increase for FY 2018,
marking the third consecutive year of increases, as well as further
cost-cutting measures.

In total the Governor vetoed $7.7 million in higher education spending
when signing the FY 2018 GAA, mostly dedicated funding for local
initiatives. As part of these cuts, the Governor vetoed $2.1 million
from the Department of
Higher Education intended to support student
internship programs.

The FY 2018 GAA funds the State
Scholarship Program at $95.6 million,
in line with current FY 2017 levels. In recent years, these
scholarships have not kept pace with steadily rising tuition and fees.
The Governor vetoed $254,000 for internships that the
Legislature’s budget included in this account.

Several small grant programs are eliminated or significantly reduced in
the FY 2018 GAA. This budget eliminates State University Incentive
Grants, down from $2.5 million in FY 2017. This grant has
supported
implementation of the Vision
Project, a Department of Higher Education
strategic plan aiming to increase quality, reduce achievement gaps, and
better connect higher education with workforce development. The FY 2018
GAA also eliminates Community
College Workforce Grants down from
$750,000 in FY 2017. Another training program,
Nursing and Allied
Health Education Workforce Development is cut in half (to
$100,000)
compared to FY 2017.

Conversely, a handful of grant programs receive new funding or
increases over current FY 2017 levels. The New England Board
of Higher Education receives an increase of $184,000 in
the FY 2018 GAA
to a total of $368,000. Additionally, an Outside Section of this budget
permits the Massachusetts Board of Higher Education to enter into
inter-state reciprocity agreements that would allow Massachusetts
public institutions to offer online distance education to students in
other states. This section would also allow accredited institutions in
other states to offer inter-state programs for Massachusetts students,
if they meet standards adopted by Massachusetts Board of Higher
Education.

A new initiative,
Innovation Voucher Fund receives $2.0 million in the
FY 2018 GAA. This program would provide grants, overseen by the
Massachusetts Development Finance Agency, to startup companies and
small corporations for facilities housed at UMass, as well as research
and development costs.

FY 2018 GAA moves the administration of Inclusive
Concurrent Enrollment
from the Department of Elementary and Secondary Education to the a new
line item (7066-9600) in the Department of Higher Education. The GAA
slightly reduces funding for this program to $1.1 million.

For a complete list of items vetoed by the Governor in higher
education, see the table below.

For information on funding for higher education programs going
back to
FY 2001, please see MassBudget’s Budget Browserhere.

ENVIRONMENT & RECREATION

The state budget funds programs that keep our air, water, and
land
clean, maintain fish and wildlife habitats, and staff and maintain our
parks, beaches, pools, and other recreational facilities. The Fiscal
Year (FY) 2018 General Appropriations Act (GAA) provides $194.2 million
for environment and recreation programs, essentially level with the FY
2017 budget. The Governor vetoed $4.8 million from the
Legislature’s budget, largely by eliminating funding for
specific environment and recreation projects located throughout the
state. A full list of vetoes is in a table at the end of this section.
Even with level funding in the FY 2018 GAA, the environment and
recreation budget is 37 percent below FY 2001 after adjusting for
inflation.

The FY 2018 GAA does not contain significant changes in funding with
the exception of a few accounts:

The GAA includes $2.0 million
to make sure our drinking water is safe, an increase of $731,000, or 59
percent, above the FY 2017 budget. The Governor vetoed $175,000 from
the Legislature’s budget which funded several specific water
projects around the state.

Even though the GAA provides
$55.5 million for state parks and recreation facilities, which is about
level with last year, the amount is $6.5 million below the amount
recommended by the Department of Conservation and Recreation (DCR)
Stewardship Council. Funding for state parks is included in both the
primary account for state parks and the account that allows DCR to
retain revenue from parking and entry fees it collects at its parks and
recreation facilities. In a
letter earlier this year to the House and
Senate Ways and Means Committees, the Stewardship Council noted that
with budget cuts and early retirements in recent years, DCR does not
have the resources it needs to fully maintain and staff facilities it
manages throughout the state. The Council called on the Legislature to
provide a total of $62.0 million for these two accounts.

For information on funding for environment & recreation
programs going back to FY 2001, please see MassBudget’s
Budget Browser
here.

HEALTH CARE

MassHealth & Health Reform

The Commonwealth’s Medicaid program, MassHealth,
provides
health
insurance for almost 1.9 million people, including more than
650,000—close to half—of the state’s
children. In addition, the state
budget funds payments to health providers such as hospitals that serve
large numbers of low-income patients and nursing homes in order to help
pay for care for patients on publicly-subsidized health insurance. The
Fiscal Year (FY) 2018 General Appropriations Act (GAA) signed by the
Governor includes $16.85 billion for MassHealth and for these related
health programs and health care financing. When signing this budget,
the Governor vetoed $222.3 million in MassHealth funding (see table
below of affected line items). Alongside the vetoes, the Governor
proposed a significant number of amendments to move forward his
proposed reforms of both MassHealth and of the health care system more
generally.

MassHealth Program and
Administration

Funding
for MassHealth in the FY 2018 GAA is $15.98 billion, with $15.82
billion for the MassHealth program, and $159.2 million for program
administration (see table). In order to help address the continuing
cost growth at MassHealth, the Administration has been taking measures
to address the program’s costs. Some reforms have already
been
incorporated into program operations, and others have been presented by
the Governor in a legislative package accompanying the enactment of the
GAA. However, the Governor indicates that the savings as reflected in
the post-vetoes GAA (reduced from the Legislature’s budget
and from the
amounts presented in his initial budget proposal) cannot be achieved
without the types of market and program reforms he is proposing.

Upon
signing the GAA, the Governor vetoed language that would have provided
$7.5 million in additional rates for nursing homes. The Governor also
vetoed $7.4 million in supplemental payments for three pediatric
hospitals that provide highly complex care, but anticipates replacing
those payments with restructured rates. The Governor let stand $13.0
million designated for supplemental payments for other safety net
hospitals. The Governor also vetoed $5.0 million from MassHealth
long-term care funding, anticipating what the Administration refers to
as “program restructuring” including increased
oversight of the home
health program and the use of overtime.

For the most part,
reimbursement rates for providers are relatively flat in this budget.
However, there is an Outside Section looking into the costs associated
with the MassHealth rates provided for continuous care skilled nursing
for pediatric patients with very complex medical needs. The study would
consider the costs of potentially avoidable hospitalizations with the
costs of home-based continuous skilled nursing.

Line item
language in MassHealth in the FY 2018 GAA requires the Executive Office
of Health and Human Services, in conjunction with the Department of
Transitional Assistance, to report to the Legislature by January 1,
2018 on the feasibility of creating a common application
for MassHealth and for Supplemental Nutrition Assistance Program (SNAP,
or “food stamps”), Emergency Aid to Elders,
Disabled and Children
(EAEDC), and Transitional Assistance to Families with Dependent
Children (TAFDC, or cash assistance). In a separate line item, there is
also language directing the Administration to plan for an integrated
digital eligibility determination process that goes even farther, and
would integrate enrollment and create a common application for benefits
at the Connector, MassHealth, and the department of Transitional
Assistance, Early Education and Care, and Housing and Community
Development.

Line item language describing the MassHealth
Managed Care
program requires the Executive Office to file a report with the
Legislature detailing progress in moving the MassHealth program towards
an integrated delivery system of accountable care organizations (ACOs).
This report would look at the cost-effectiveness of MassHealth spending
on services not traditionally reimbursed by MassHealth, such as housing
stabilization and support, utility payments, physical activity and
other wellness supports.

Funding for the Children’s
Medical Security Plan (CMSP)
in the FY 2018 budget is $12.1 million, $5.4 million less than in FY
2017. The Administration is planning to shift the administration of
this program from UniCare, a health insurance company that has been
under contract with the Commonwealth to administer the program. CMSP
will be brought in-house, be administered by the Executive Office of
Health and Human Services, alongside MassHealth, saving the state $5.0
million annually.

Other Health Subsidies
and Related Spending

In
addition to funding for the MassHealth program directly, the FY 2018
GAA includes funding for supplemental payments to health safety net
providers, funding for other subsidized health programs, and various
administrative and operational supports for health care administration
and finance (see table).

The
totals for the Medical Assistance Trust (see chart) show budgeted
appropriations that are current as of this moment. The timing of
operating transfers into this trust, as shown below, which are made up
of provider assessments and federal revenues, do not align with the
state fiscal year. The apparent large difference between FY 2017 and FY
2018 is simply due to the timing of the transfers. There will likely
not be a significant difference in spending from this trust for FY 2018
compared to FY 2017.

As in FY 2017, the FY 2018 budget includes an assessment on acute hospitals,
which would receive federal matching reimbursements. These revenues
would be deposited in the MassHealth Delivery System Reform Trust, with
hospitals as a group receiving this assessment back in the form of
enhanced Medicaid rate payments. New in the FY 2018 budget is language
extending the assessment on acute hospitals to non-acute hospitals.
This assessment (along with federal reimbursement) would help support
Medicaid rate increases for psychiatric, chronic, and rehabilitation
hospitals.

The budget includes language providing for a transfer of up to $15.0
million into the Health
Safety Net (via
funds from the Commonwealth Care Trust Fund) to support the costs
associated with providing care to uninsured or underinsured
individuals. Prior to FY 2017 that transfer had been $30.0 million.

ConnectorCare
(the “State Wrap”) is the subsidized program for
people previously
covered by the Commonwealth Care Program who are not eligible for
MassHealth coverage and have incomes at or below 300 percent of the
federal poverty level. ConnectorCare plans have relatively low monthly
premiums and out-of-pocket costs. This program is administered by the
Health Connector, and is funded through the Commonwealth Care Trust
Fund rather than by line-item appropriations in the budget. As in FY
2017, the FY 2018 budget allows for a transfer of funds from the
Commonwealth Care Trust Fund to the General Fund to help balance the
budget. In FY 2017, the expected transfer may be approximately $92
million or up to as much as $110.0 million. The FY 2018 GAA includes
language, first proposed in the Legislature’s budget,
allowing for a
transfer of up to $185.0 million from the Commonwealth Care Trust Fund
to the General Fund, however the actual amount that will be transferred
could very well be much less.

The Governor vetoed the following amounts from the following line items:

For information on funding
for MassHealth (Medicaid) and health reform programs going back to FY
2001, please see MassBudget’s Budget Browserhere.

When
the Governor first released his budget in January, he identified a
factor driving increased costs for the MassHealth program: costs being
shifting from private sector employers to the state as the result of
more private sector employees not receiving health care from their
employer. To address this cost-shifting and to
create an incentive for employers to offer affordable health insurance
for their employees, the Governor proposed
an assessment on employers that would generate $300.0 million for FY
2018. The assessment would apply to employers that do not offer health
insurance, or who fail to meet certain benchmarks for the share of
their employees actually being covered by the employer-provided
insurance. The House and Senate budgets included other forms of
temporary employer assessments that would have generated $180.0 million
in revenue.

In June, the Governor proposed a new package of
health reforms, including an employer contribution towards health care,
and a variety of MassHealth and commercial health insurance market
reforms. The Legislature’s budget adopted the
Governor’s
proposed
employer contribution, but not the MassHealth or commercial health
insurance market reforms. As proposed by the Governor and adopted by
the Legislature, the assessment increases the existing Employer Medical
Assistance Contribution (EMAC) rate, which pays for health insurance
for people receiving unemployment insurance. The
Legislature’s budget
increased the EMAC in two “tiers”: increasing the
EMAC by $26 per
employee and assessing a $750 fee for each employee receiving
publicly-subsidized health care either through MassHealth or through
ConnectorCare. This assessment would bring in $200.0 million and would
sunset in December 2019. (The Legislature also included the
Governor’s
recommendation to freeze unemployment insurance payments, allowing
employers to pay $334 million less than under the current schedule.)

It
is the Administration’s position that the employer
contribution and
MassHealth and other reforms should go together. Since the
Legislature’s budget included the increased EMAC without the
other
reforms, the Governor vetoed the EMAC provisions in the
Legislature’s
budget and instead proposed amendments that would both reinstate an
employer assessment and would restructure eligibility and modify
benefits in the MassHealth program. Moreover, the Governor provided
companion legislation with his proposals for reform of the health
insurance market. The Governor states that these initiatives
“would
better align the MassHealth program with commercial insurance . . . and
. . . ensure MassHealth is a secondary payer when individuals have
access to employer-sponsored health insurance coverage.” In
fact, the
Governor states that his vetoes in the MassHealth program in the FY
2018 GAA presume a level of savings that could only be realized by the
types of reforms included in his health reform package.

Chief
among the Administration’s priorities is to more closely
“align” the
MassHealth program with commercial health insurance. Some of these
changes would require federal approval.

The Governor recommends
restructuring or eliminating covered services that are optional
benefits in order to generate program savings and to make MassHealth
benefits look more like commercial insurance benefits. Specifically,
the Governor proposes eliminating coverage for non-emergency medical
transportation for CarePlus members (except for transportation to and
from appointments for substance use disorders), and restructuring
pharmacy benefits for MassHealth members, including limiting specialty
pharmacies and restructuring prescription drug formularies. These
prescription drug coverage changes could have an impact on access to
affordable medicine for people with rare or complex health conditions.

The
Governor also proposes barring people (without disabilities) who have
access to affordable employer-sponsored health insurance from obtaining
MassHealth insurance coverage. This is referred to as an eligibility
“gate”. The Governor proposes a number of
administrative changes, (such
as the re-institution of a Health Insurance Responsibility Disclosure
(HIRD) form, and requiring employers to report on health insurance
coverage and options for their employees. The Administration hopes that
all of these strategies will promote the uptake of employer-sponsored
insurance, and increase the availability of affordable health
insurance. The Administration also hopes for savings by using the
MassHealth Premium Assistance plan in combination with
employer-sponsored insurance for eligible low-income working adults.

The
Administration proposes creating more limited networks for MassHealth
members, and shifting certain people from MassHealth coverage to either
ConnectorCare or CarePlus. Although the Governor does not anticipate
that some of these changes could take effect until FY 2019, the
Administration hopes to transfer approximately 140,000 non-disabled
adults with incomes from 100-138 percent of the federal poverty level
from MassHealth to ConnectorCare, and transfer an additional 230,000
non-disabled parents and caretakers with income less than 100 percent
of the federal poverty level from MassHealth to CarePlus. ConnectorCare
and CarePlus have fewer benefits and higher out-of-pocket costs than
MassHealth, which could put these very low-income adults at risk of
losing access to affordable health insurance without some program
modifications or “wrapped” benefits. These shifts
would reduce state costs, as the tax credits and cost sharing reductions
for ConnectorCare are funded by the federal government, and spending
for the CarePlus program (Massachusetts’ Medicaid expansion
program) offers fewer benefits than does MassHealth
Standard. (See What Is the Actual State Cost of
MassHealth in 2018? for more details.)

The
GAA includes an Outside Section directing the Administration to
consider creating a plan for small businesses to share in the premium
costs of providing MassHealth insurance coverage for eligible employees
with incomes under 138 percent of the federal poverty level. The GAA
also anticipates that such a program could expand to more employers and
to insurance provided to individuals on the Connector.

The Governor’s health reform amendments to the GAA also
include:

Approval
of licensure for a new mid-level oral health professional, dental
therapists, who would be allowed to prescribe certain medications. This
is an important effort to improve access to oral health care,
particularly for traditionally hard-to-serve populations, such as
elders, persons with autism spectrum disorder, intellectual
disabilities, and complex health conditions.

Creation of an incentive program to expand health insurance
provision by small businesses.

Placing a five-year moratorium on new mandatory health care
benefits.

Discontinuing
MassHealth Limited coverage for people who are also eligible for
ConnectorCare. Although this might affect only a small number of
people, unless carefully implemented, eliminating this dual eligibility
could provide a gap in coverage for some individuals.

Separately,
the Governor’s companion health market reform legislation
aims to
reduce the costs of health care, and thereby also make commercial
insurance more affordable for employees. These proposed market reforms
include:

Increasing the differences in premiums between
“tiered” network plans with the intent of creating
more affordable
commercial health insurance options.

Expanding the scope of practice for optometrists,
podiatrists, and advanced practice nurses.

Creating more transparency about health care costs and
options for consumers.

Mental
Health

The Fiscal Year (FY) 2018
General Appropriations Act (GAA)
signed by
the Governor includes $768.9 million for the services of the Department
of Mental Health (DMH), in order to help ensure that people in the
Commonwealth struggling with and recovering from mental illness are
able to become healthy and live and work successfully in the community.
DMH provides supports to approximately 21,000 people—children
as well as adults—through a network of inpatient facilities,
residential treatment programs, and community support. DMH also
evaluates more than 8,000 people each year who have been referred by
the judiciary for evaluation. Total funding is slightly ($4.9 million)
above current FY 2017 budgeted amounts. (See table for breakdown.)

The budget includes a
continued effort to move supports for
behavioral
health and substance misuse out of the corrections systems and into the
behavioral health systems. For instance, there is full funding ($13
million) for 45 beds at Taunton State Hospital to provide support for
women who have been civilly committed for substance use disorders as
well as other co-occurring behavioral health disorders. There is also
language in Outside Sections of the budget allowing men civilly
committed with alcohol or other substance use disorders to be treated
at facilities other than MCI Bridgewater, including but not limited to
the Massachusetts Alcohol and Substance Abuse Center in Plymouth. This
facility is essentially a “re-purposing” of MCI
Plymouth and this shift would increase the number of available beds for
these individuals in need of treatment. (Please also see
“Public Health” section of this Budget Monitor for
additional discussion of funding for substance abuse services.)

Child and adolescent health
services receives $88.9
million in the FY
2018 budget, which is essentially level with funding in FY 2017.
Although the Governor vetoed $2.8 million from the total (see veto list
below), including $800,000 in earmarks for particular local programs,
he let stand an earmark for $1.95 million to increase case management
services, including enhancing services for older adolescents and young
adults, and increasing funding for consultation and training with early
childhood providers, schools, and community agencies with the intent of
increasing early identification and prevention.

(Although not included in
these totals here, but included in the Early
Education and Care totals in this Budget
Monitor, the budget includes
$1.25 million—reduced by veto from $2.5 million—for
early childhood mental health consultation services. These services
were last funded at $750,000 from FY 2011 through FY 2016. Also not
included in these totals is the Governor’s $50,000 veto of
the Juvenile Court Mental Health Access Project as mentioned in the
Child Welfare section of this Budget
Monitor.)

The FY 2018 budget includes
language directing at least $3.7 million to
the Massachusetts Child Psychiatry Access Project (MCPAP), $100,000
more than in FY 2017. MCPAP is an innovative program that improves
access to treatment for children with behavioral health needs by making
psychiatrists available to provide consultation for primary care
providers across Massachusetts. The budget also directs DMH to increase
the capacity of the program and provides funding for the
“MCPAP for Moms” program that screens for
postpartum depression.

The Governor vetoed the
following amounts from the following line items:

For information on funding
for mental health programs going
back to FY
2001, please see MassBudget’s Budget Browser
here.

Public
Health

The Fiscal Year (FY) 2018
General Appropriations Act (GAA)
signed by
the Governor includes $605.4 million for public health. The Department
of Public Health (DPH) oversees a wide variety of prevention and
treatment services, improves access to health care, and ensures the
safety of our food and water. The Governor vetoed a total of $7.9
million in funding from DPH, largely removing funding earmarked for
specific local programs, bringing funding to essentially level ($1.0
million above) FY 2017 budgeted totals. (See below for list of public
health vetoes.)

The FY 2018 budget reflects
the Administration’s continued
commitment to preventing and treating substance misuse and addiction,
and initiatives at DPH are central to that effort. Combined, the
funding for substance use disorders and services to prevent and treat
addiction at DPH total $145.3 million. This is $3.5 million more than
funding in FY 2017, a notable increase during a period when funding for
many other services has been constrained (see table for details). The
increase has been concentrated in the newly-renamed Bureau of Substance
Addiction Services, as well as in a line item new this year with
funding that is entirely designated for specific local substance use
disorder programs.

There is little new
investment in other areas crucial to
protecting
public health. Maternal and child health programs receive a total of
$67.4 million in the GAA. This is slightly ($665,000) more than FY 2017
budget totals, and includes:

$11.9 million for the state
supplement for the WIC
(Women, Infants, and Children) Program, 5.5
percent below FY 2017. The Governor vetoed $18,000 from the
Legislature’s total in accordance with his estimates of
anticipated program costs.

The Governor vetoed funding
for the Postpartum
Depression Pilot
Program, supporting community health workers at a handful of
health
centers who work with women with postpartum depression. The Governor
also eliminated this program with mid-year cuts in FY 2017.

The FY 2018 budget continues
chipping away at funding for the
state’s anti-smoking efforts in DPH. The Smoking
Prevention
and Cessation program receives $3.7 million. This is 3.8
percent below
funding in FY 2017. At one time, Massachusetts led the nation with its
successful public health campaign to reduce smoking. In FY 2001, for
example, the state budgeted close to the equivalent of $90 million (as
adjusted for inflation) to support anti-smoking efforts. This funding
was cut dramatically in the next year, and has dwindled away over the
subsequent decade and a half.

DPH oral health programs
receive a 7.9 percent increase compared to FY
2017 with a total of $2.8 million. After a $150,000 veto, funding for
Dental
Health Services is $1.9 million, $203,000 above funding in
FY
2017. The SEAL
sealant and fluoridation program receives level funding
of $891,000. One of the major oral health care initiatives debated
through the budget process has been the proposal to recognize a new
mid-level dental provider. The Governor proposed an amendment (Section
16) to allow for the licensing of dental therapists, an important
initiative to expand access to oral health care in underserved
communities.

There are several programs in
the budget that together are designed to
provide community-based activities and supports for young people to
keep them engaged and ultimately reduce violence (see table). Together,
these programs are funded at $950,000 less than in FY 2017, a 9.5
percent reduction. For example, the Safe
and Successful Youth
Initiative targets at-risk young people in communities
across the
Commonwealth and provides a public health approach to reducing
gun-related violence. This program receives $4.3 million in the FY 2018
GAA, a $2.25 million reduction from FY 2017 levels.

Because the FY 2018 does not
include the Senate’s
proposed
increased tax on flavored cigars, there is no source of the funding in
the GAA for the (off-budget)
Prevention and Wellness Trust Fund. The
Fund supports partnerships among community organizations, health
providers, and local governments to promote healthier living. The
trust, currently funded by a one-time assessment on insurers, may run
out of money during the course of this fiscal year.

The Governor also vetoed an
Outside Section creating a commission to
for childhood vision and eye health. The Administration states that
this commission is not necessary for improvements to existing childhood
vision screenings, and that new vision screening protocols established
by DPH in conjunction with schools could go a long way towards
addressing the concerns about children’s eye health that
underlay the proposed creation of the commission.

The Governor vetoed the
following amounts from the following line items:

For information on funding
for public health programs going
back to FY
2001, please see MassBudget’s Budget Browserhere.

State
Employee Health Insurance

The Fiscal Year (FY) 2018
General Appropriations Act (GAA)
signed by
the Governor includes $1.58 billion to cover the costs of health
insurance for state employees. This total includes coverage for current
employees as well as retirees (discussed more below). Although the
budget debate this year started off with a proposal from the Governor
to keep state employee health insurance costs down in part by capping
provider rates paid by the state’s Group Insurance Commission
(GIC), this initiative was never taken up by the Legislature and
therefore not included in the budget as signed.

In order to more accurately
reflect health insurance costs,
MassBudget’s totals for state employee health insurance
include adjustments that allow for better across-year comparisons (see
table). MassBudget removes from budget totals the amounts each year
that are simply pass-throughs of funding for municipal health
insurance. Municipalities have the option of taking advantage of the
state’s purchasing power by using the GIC to purchase their
employees’ health insurance. Municipalities reimburse the
state for the costs of this insurance, so there is no cost to the state
for adding these municipal employees to the GIC membership rolls.

State
Retiree Benefits

The state has adopted a
schedule to move towards full funding of health
and other non-pension post-employment benefits
(“OPEB”) for retirees. The Commonwealth funds the
current and future costs of OPEB through transfers to the State Retiree
Benefits Trust.

The GAA includes $432.4
million in a direct operating transfer to the
State Retiree Benefits Trust, presumably to ensure funding for current
retiree benefits.

In order to fully fund the
cost of
future retirees’ benefits,
in FY 2012 the state decided to dedicate an increasing share of its
annual Master Tobacco Settlement award to the State Retiree Benefits
Trust. By 2018, the state would be depositing 60 percent of the award,
currently estimated at $154.5 million. The FY 2018 GAA proposes
transferring an amount equivalent to just 10
percent of the Tobacco Settlement award—$25.8
million—into the State Retiree Benefits Trust to fund OPEB,
instead of transferring $154.5 million. Language in the budget states
that this transfer would come from unexpended debt payments reverted to
the General Fund or, if those reversions were insufficient, the
transfer would come directly from the Master Tobacco Settlement revenue
deposited into the General Fund.

With these modifications, the
FY 2018 OPEB transfer is $128.8 million
less than the amount indicated for FY 2018 in the statute. Moreover,
the Administration anticipates making that transfer out of reversions
of debt service appropriations, rather than from general revenues.

HUMAN
SERVICES

Child
Welfare

The Fiscal Year (FY) 2018
General Appropriations Act (GAA)
signed by
the Governor includes $976.4 million to support the child welfare
system, the state’s services designed to protect children at
risk of neglect or abuse. This total is $28.8 million more (3.0
percent) than currently budgeted for FY 2017. The Department of
Children and Families (DCF), the agency responsible for child
protection and custody, has a dual mission: to strengthen and preserve
vulnerable families, and to protect the children in vulnerable
families, which sometimes requires removing those children from their
home environments. Funding at DCF serves both of these functions.

Funding for the case
workers who work directly with families and
children totals $236.8 million, a $13.3 million increase over FY 2017
funding, or 6.0 percent. In part due to highly-publicized cases
involving children and families involved with DCF, the Administration
has made a concerted effort to increase staffing at DCF and address
some of the challenges faced by the staff who work directly with
at-risk families. Although the case workers’ union contract
aims to limit caseloads to 15 families each, the Administration
estimates that increased staffing funded through this proposed budget
could bring the caseload ratios closer to level as it annualizes
funding for 450 new staff people. The budget also increases funding to
train
these new workers by $205,000, an 8.3 percent increase to $2.7
million. The FY 2018 budget includes $289.6 million for
foster care and
adoption services, a $3.5 million increase over FY 2017
funding. The
Governor did, however, veto $403,000 from this line item that the
Legislature had designated for specific programs (see table below for
line items affected by the Governor’s vetoes).

The budget includes $278.6
million for group
or congregate residential
care. The Administration has projected approximately 1,600
children
living in congregate care settings, and this funding also supports
certain short-term intensive placements, such as Stabilization,
Assessment, and Rapid Reintegration (STARR). Funding for congregate
care is comparatively more expensive than family-based care.
Furthermore, the state has had to use congregate care in some instances
simply because of the scarcity of foster families. The FY 2018 budget
is $9.1 million over the FY 2017 budget.

As in FY 2017, the FY 2018
budget includes $250,000 to support Foster
Care Parent Outreach, an initiative to encourage more
families to open
their homes to foster children.

The vast majority of children
connected to DCF are not in foster care,
but rather live with their families with supports and services provided
by, or coordinated with, DCF. Estimates from March 2015 suggest that
close to 9 of every 10 children involved with DCF either live at home
with their families or are in foster care but awaiting return to their
homes. The FY 2018 budget includes $47.6 million for
family support
services, a $750,000 increase over FY 2017. This increase
will help
provide the services families might need to help them stay together
safely and prevent child neglect.

In addition to the funding
for DCF, the FY 2018 budget provides
$112,000 for what is known as the Grandparents
Commission, which
focuses on concerns of grandparents with primary responsibility for
raising grandchildren. This total is $12,000 more than funding in the
FY 2017 current budget.

There are two line items
supporting funding for Family Resource Centers
in the budget that are closely related, one of which is included in the
Child Welfare totals in this
Budget Monitor, the other of which is
included in the Other Human Services totals. DCF funding includes $9.7
million for these Family
Resource Centers, a statewide network of
community-based organizations providing access to services for at-risk
families. The Governor vetoed $50,000, which had been targeted to a new
program providing mental health access for children and adolescents at
risk of entering the juvenile justice system.

The Governor vetoed several
Outside Sections of the budget that would
have created a commission to make recommendations to the Legislature
about child welfare data reporting, including recommendations to
eliminate duplicate reports. The Administration stated that such a
commission would not be necessary.

The Governor vetoed the
following amounts from the following line items:

For information on funding
for child welfare programs going
back to FY
2001, please see MassBudget’s Budget Browser
here.

Disability
Services

The state budget supports a
range of programs for individuals
with
disabilities. These include targeted job training programs that help
people participate in the workforce as well as community-based supports
to assist people and their families more broadly. The Fiscal Year (FY)
2018 General Appropriations Act (GAA) funds disability services at
$1.95 billion, reflecting $8.0 million in vetoes by the Governor. Total
funding is $44.4 million (or 2.3 percent) higher than FY 2017 funding
levels.

The majority of funding for
disability services - $1.2 billion - goes
to Community Residential
Services for Developmentally Disabled, which
supports adults in various residential settings to live as comfortably
and independently as possible. This is $47.6 million (or 4.3 percent)
higher than FY 2017 funding levels and reflects a $6.8 million veto.
The veto is based on the amount the administration projected to be
necessary.

The
Turning 22 program under the Department of Developmental
Services
(DDS) receives $23.1 million, which is $4.8 million (or 26.2 percent)
above FY 2017 funding. This program pays for a share of services for
young adults with disabilities for a portion of the year that they turn
22 years old. During this year, these young adults leave special
education services and transition into the adult service system. Also,
Respite
Family Supports under DDS, which provides short-term care for
the family member with a disability, allowing parents and other
caregivers to handle personal matters or otherwise get a break,
receives $63.5 million, which is essentially level with FY 2017 funding.

The Governor vetoed $180,000
in the State
Operated Residential Services
account for a local project for DDS clients. This brings
the account
$10.5 million (or 4.8 percent) below FY 2017 funding levels.

The Governor eliminated
Transitions to Work, citing limited projected
revenues. He also eliminated Aging
with Developmental Disabilities
because it was not in line with his FY 2018 budget
proposal. The Aging
with Developmental Disabilities program provides direct support for
older adults with developmental disabilities, staff training for
identifying age-related conditions, and data collection on the
effectiveness of support and training. Transitions to Work provides a
range of job training and placement services to young adults with
disabilities.

For information on funding
for all disability services going
back to FY
2001, please see MassBudget’s Budget Browserhere.

Elder
Services

The Fiscal Year (FY) 2018
General Appropriations Act (GAA)
funds elder
services at $285.4 million, reflecting $647,300 in vetoes by the
Governor. Total funding is $10.8 million (3.9 percent) higher than FY
2017 funding levels.

The majority of funding for
elder services programing goes to support
elder home care services,
which allow elders to age in place instead of
living in a nursing home. In aggregate, the FY 2018 GAA for elder home
care services is $226.0 million, an increase of $10.8 million (or 5.0
percent) when compared to FY 2017 funding levels.

The Governor vetoed $12,300
for the elder
nutrition program and
$635,000 in grants to the Council
on Aging. Most of these reductions
eliminated dedicated funding to specific senior centers and local
councils on aging in the state.

For information on funding
for all elder services going back
to FY
2001, please see MassBudget’s Budget Browserhere.

Juvenile
Justice

The Fiscal Year (FY) 2018
General Appropriations Act (GAA)
funds
juvenile justice programs at $178.7 million, reflecting $1.8 million in
vetoes by the Governor. Total funding is essentially level with FY 2017
funding.

The Governor vetoed $500,000
for a specific detention diversion
advocacy program in the Residential
Services for Detained Population
account, which funds detention services for youth awaiting trial. In
addition, the Governor vetoed $1.3 million from the Residential
Services for Committed Population account, which funds
facilities and
residential programs for Department of Youth Services (DYS) committed
youth not living in the community. Total funding for this account
reflects the amount the Governor projects to be necessary.

For information on funding
for all juvenile justice programs
going back
to FY 2001, please see MassBudget’s Budget Browserhere.

Transitional
Assistance

Transitional assistance programs help low-income individuals
and
families meet their basic needs and improve their quality of life when
faced with an emergency. The Fiscal Year (FY) 2018 General
Appropriations Act (GAA) funds transitional assistance programs at
$618.8 million, reflecting $7.1 million in vetoes by the Governor.
Total funding is $38.7 million (or 5.9 percent) lower than FY 2017
funding levels.

A large portion of this decrease comes from the Transitional
Assistance for Families with Dependent Children (TAFDC)
account, which is reduced by $35.0 million (or 18.3 percent) below FY
2017 funding and reflects $6.6 million in vetoes. The reduction assumes
a decrease in caseloads, which one would expect with an improving
economy that enables more people to secure employment and improve their
circumstances rather than seek this assistance. However, current
caseload reductions may partially result from new administrative
changes that make it harder for clients to maintain their benefits. The
reduction also accounts for the Governor’s plan to change how
the Department of Transitional Assistance (DTA) determines TAFDC
eligibility and benefits for some families receiving Supplemental
Security Income (SSI). The Governor plans for DTA to count SSI benefits
to caregivers, who have a severe disability, in determining eligibility
and benefits. The measure would reduce or eliminate TAFDC benefits to
about 7,000 children.

While the Legislature’s budget increased the clothing allowance
from $250 to $300 per eligible child receiving TAFDC, the Governor
vetoed the increase. The clothing allowance is for annual payment made
in September to help low-income families pay for back-to-school
clothing. The rent
allowance remains at $40 per month.

The
Employment Services Program receives $14.0 million, which
reflects a $150,000 veto in specific worker transportation programs.
This total is $1.4 million (or 11.2 percent) above FY 2017 funding
levels.

The Food
Stamps Participation Rates Program, which funds programs
designed to increase the participation of residents eligible, but not
currently signed up, to receive SNAP (formerly food stamps), receives
$4.4 million, which is $1.4 million above FY 2017 funding levels.
However, the Supplemental
Nutrition Program (SNAP) State Supplement receives $300,000,
which is $400,000 (or 57.1 percent) below FY 2017 funding. The total
reflects a $300,000 veto by the Governor because the funding level was
not in line with his FY 2018 budget proposal.

The GAA budget also includes language requiring the Executive Office of
Health and Human Services, in conjunction with DTA, to report to the
Legislature by January 1, 2018 on the feasibility of creating a common application for
MassHealth, SNAP, TAFDC, and Emergency Aid to Elders, Disabled and
Children (EAEDC).

For information on funding
for all transitional assistance programs going back to FY 2001, please
see MassBudget’s Budget
Browser here.

Other
Human Services

The Fiscal Year (FY) 2018
General Appropriations Act (GAA)
signed by
the Governor includes $201.9 million for other human services. This
funding includes allocations for veterans’ services, food
banks, and some cross-agency initiatives. This amount is $12.2 million
less than budgeted totals for FY 2017. Much of the decrease is
associated with the scheduling of rate adjustments held in a reserve
account for a variety of health and human services providers that we
include in this subcategory of this Budget Monitor (see
discussion
below).

The FY 2018 budget includes
$17.0 million for the Emergency
Food
Assistance Program which is level with FY 2017 current
funding. This
funding supplements federal funding to support the statewide network of
food banks that provide food to families struggling to make ends meet.

The budget also includes
$400,000 for the
Low-Income Citizenship
Program in the Office for Refugees and Immigrants,
level-funded with FY
2017. This program assists legal permanent residents in becoming
citizens.

After a veto of $4.0 million
by the Governor (see table below), the
budget includes $35.7 million for legally required Chapter 257 rate
increases. Chapter 257 standardizes rates paid to various
types of
human service providers in order to make the system more efficient and
fair. The amount included in the Chapter 257 reserve account funds the
planned rate increases for providers across many human and social
service programs. There are increases planned beginning FY 2018 that
affect several agencies, including services provided by the Department
of Developmental Services, the Department of Public Health, and the
Department of Mental Health. For more information on the rate
standardization and the timing of the implementation across state
agencies, see the state’s Chapter
257 update. This reserve
contains the amounts for the initial increases, and over the course of
the year those funds are then distributed to the individual agencies to
fund their providers’ rate adjustments. In subsequent years,
that increased funding would from then on be included in the totals of
the agencies that received the funds and included in other sections of
this Budget Monitor.

In addition to funding at the
Dept. of Children and Families
and
included in the Child Welfare section of this Budget Monitor, the
budget includes $500,000 for the Executive Office of Health and Human
Services to administer and provide technical assistance to the
state’s network of Family
Resource Centers. The Executive
Office lost its FY 2017 funding for these resources in mid-year cuts.

The Governor vetoed the
following amounts from the following
line items:

For information on funding
for other human services programs
going back
to FY 2001, please see MassBudget’s Budget Browserhere.

INFRASTRUCTURE,
HOUSING
& ECONOMIC DEVELOPMENT

Transportation

The state supports an array
of transportation systems,
including roads,
bridges, rail, buses, airports, and ferries that enable people and
goods to travel where they need to go. Much state funding for
transportation takes place through dedicated revenue sources and a
separate capital budget process. For a chart and description of funding
for transportation operations and debt service, see
MassBudget’s fact sheet, “What
Does Massachusetts
Transportation Funding Support and What Are the Revenue
Sources?”

The Massachusetts
Transportation Trust Fund (MTTF) contributes to
highways, transit, intercity rail, small airports, the Massachusetts
Turnpike, and the Motor Vehicle Registry. The MTTF receives funds from
tolls and federal transportation sources as well as a transfer from the
Commonwealth Transportation Fund. After the Governor’s
vetoes, this budget reduces spending for the MTTF to $302.1 million, a
$41.0 million decline (11.9 percent) compared to the Fiscal Year (FY)
2017 budget.

Most of the reduction in the
MTTF transfer comes from the Legislature
underfunding snow and ice control. This will not likely end up as an
actual cut. Lawmakers have tended to underfund the snow and ice removal
account, knowing that if needed the Legislature will appropriate
additional funds for this purpose in a supplementary budget. The
Legislature proposed a new $104.1 million contingency fund (line item
1599-1690) as a reserve to address their underfunding of the accounts
for snow and ice removal, public counsel, and the sheriffs’
offices. The Governor concluded
that this amount was insufficient,
finding that, “there are $198 million in unavoidable
deficiencies that will need to be addressed in FY18.” The
Governor filed a $94.1 million supplementary budget
bill to meet this
anticipated deficiency.

The Governor also reduced
funding for the MTTF transfer by vetoing
nearly every local transportation improvement the Legislature supported
in its budget. The Legislature’s budget included $1.3 million
for a list of 15 specific local transportation improvement projects,
such as to repair a particular intersections, build a designated
pedestrian paths, or operate a specific local shuttle service. The
Governor vetoed all these local allocations, with the exception of
$50,000 for transportation to a camp in Boston Harbor.

Following earlier proposals
in this budget cycle, the Legislature
reduced Massachusetts
Bay Transportation Authority (MBTA) operating
assistance to $127.0 million, a reduction of $60.0 million compared to
the FY 2017 budget. This reduction is expected to be accompanied by an
increase in capital funding of the same amount. Anticipating this
shift, the Department of Transportation’s draft capital plan
in May included $60.0 million in the state bond cap allocation
that had
not been in the earlier draft. This capital allocation, supported
through the issuance of state bonds, would be for
“[s]upplemental capital funding for state of good repair and
modernization projects across the system including signal upgrades and
station improvements.” The budget includes language that
requires the MBTA to provide quarterly reports accounting for how
future operating transfers are spent and it mandates that the authority
report the level of funding they expect to request through 2021. The
legislative language also stipulates that the MBTA is required to
include this funding in their future presentations on the structural
deficit – instead of presenting a structural deficit that
omits this funding – and, that the money “shall be
used to prevent diminished service levels and diminished personnel
levels.” In the last two years the MBTA has redirected a
growing portion of operating assistance to its capital account while
arguing that projected operating deficits made
it necessary to end
late-night bus service, curtail the scope of paratransit service, raise
fares, and privatize some functions.

After the
Legislature’s budget reduced funding for the
state’s 15 Regional
Transit Authorities (RTAs) to $80.4
million in FY 2018, the Governor’s veto further reduces
support to $80.0 million. These amounts are below the $82.0 million
that the RTAs received in FY 2017 and FY 2016.

The Legislature’s
budget also assumes increased
transportation funding through measures that would add to sales tax
revenues available in FY 2018 and thereby increase the dedicated
portion of those sales taxes to the MBTA. These changes are described
in the “Revenue and Budget Balance” section of
MassBudget’s previousBudget Monitor.
With these changes and
a growing economy, the Legislature anticipates that sales tax revenues
will grow enough this year to yield $1.01 billion in dedicated sales
tax revenue transfers for the MBTA, an increase of $9.2 million over
the current FY 2017 amount.

In addition to vetoing
spending through particular line items,
the
Governor also proposes an amendment to an outside section in the
Legislature’s budget. The section requires the Department of
Transportation (MassDOT) to contact holders of EZ pass accounts with
large sums of outstanding fees and fines amassed on unpaid tolls to
alert them and confirm their mailing address. The Governor increased
the threshold for this action from the $100 in unpaid fees and fines
proposed by the Legislature to $500.

The Governor let stand the
following other transportation-related
policy changes approved by the Legislature as outside sections of the
budget:

Requiring MassDOT to
annually
report on how much capital expenditures are used to match federal
projects and detail departmental employee salaries included in capital
expenditures and the impact of including these salaries as capital
expenditures.

Enabling the Pension
Reserves
Investment Management Board to manage the investment of the MBTA
Retirement Fund, if the MBTA Retirement Fund board agrees.

Requiring MassDOT to
convene a
working group to evaluate establishing direct seasonal weekend
passenger rail service between New York City and Pittsfield between
Memorial Day and Columbus Day weekends modeled on the CapeFLYER
passenger rail.

Requiring MassDOT to
conduct a
feasibility study on establishing a highway interchange on Interstate
90 between the existing interchanges located in the municipalities of
Westfield and Lee.

Increase the value of real
estate that MassDOT may sell without a competitive bidding process from
less than $5,000 to $50,000 or less.

For information on funding
for transportation programs going
back to FY
2001, please see MassBudget’s Budget Browser
here.

Housing

The state budget funds
affordable housing and shelter for
low-income
homeless families and individuals. The Fiscal Year (FY) 2018 General
Appropriations Act (GAA) signed by the Governor provides $432.3 million
for affordable housing programs, which is $22.4 million below the FY
2017 current budget. The Governor vetoed $8.0 million from the
Legislature’s housing budget, the majority of which
eliminated specific projects included in various line-item accounts. A
full list of housing vetoes is included in the table at the end of this
section.

The FY 2018 GAA is lower than the FY 2017 budget largely because it
provides $21.1 million less than the FY 2017 budget for Emergency
Assistance (EA). EA provides shelter to low-income, homeless
families
with children who qualify for assistance. The GAA amount of $154.9
million is $9.8 million below the Governor’s initial FY 2018
proposal and $11.2 million below the Senate budget. Because EA provides
shelter to all families who are eligible, both the Governor’s
and Senate’s proposals provided funding to meet anticipated
caseload levels for FY 2018. Given that the GAA is below both of these
proposals, it is likely that the Legislature will have to provide
supplemental funding for EA in FY 2018. For a full discussion of this
issue, please see the
Housing section of MassBudget’s
Conference Preview. The Governor also vetoed $995,000 for specific
projects included in the EA account, the largest of which would have
provided $800,000 for summer and out-of-school time opportunities for
children staying in EA shelters.

The state budget also funds programs that provide short-term assistance
to help low-income families avoid shelter altogether or move from
shelter into housing.
HomeBASE provides up to $8,000 in housing
assistance, including rent, for 12 months to families who are qualified
to stay in EA shelters. The FY 2018 GAA provides $30.1 million, which
is $1.8 million less than in FY 2017.

Residential Assistance for Families in Transition (RAFT)
provides up to
$4,000 in assistance during one year to help prevent families from
becoming homeless. Because RAFT is not required to help every
low-income family who qualifies for assistance, it often runs out of
funding before the fiscal year ends. The FY 2018 GAA provides $13.0
million for RAFT, which is level with the last year. The Governor
vetoed $2.0 million, which would have expand RAFT to help the elderly,
people with disabilities, and unaccompanied youth at risk of becoming
homeless.

The state budget also funds long-term supports to help families and the
elderly secure housing. The
Massachusetts Rental Voucher Program (MRVP)
supports vouchers for low-income renters. The GAA provides $92.7
million for MRVP, which is $6.2 million above the FY 2017 budget.
Because of the revenue shortfall, noted in the Revenue section of this
Monitor,
the Legislature’s budget reduced funding below the
$100.0 million recommended by both the House and the Senate. Both
chambers estimated that their budgets would have allowed the state to
create 300-400 new vouchers in FY 2018. At the lower funding level, it
is likely that the Department of Housing and Community Development
(DHCD) will not be able to create any new vouchers in FY 2018. The FY
2018 GAA also increases the amount of income that voucher holders can
earn before they lose their vouchers. For a discussion of this change,
please see the Housing
section of MassBudget’s Conference
Preview.

Subsidies to Public Housing Authorities supports affordable
housing for
families and the elderly. The GAA provides $63.0 million to Local
Housing Authorities (LHAs), which is $1.5 million below both the FY
2017 and Legislature’s budgets. In his veto message, the
Governor stated that that the lower funding level would be adequate to
meet projected needs. In its budget, the Legislature had encouraged
DHCD to make every effort to direct funding towards renovating family
units. At the lower funding level, it is unlikely that LHAs will have
the resources to make these repairs.

Other notable stories for housing accounts in the FY 2018 GAA include:

The Governor eliminated
the
program that provides shelter and services to homeless
youth up to age
24 who are not in the care of a parent or guardian. This program
received $2.0 million in FY 2017 and $675,000 in the
Legislature’s FY 2018 budget.

The FY 2018 GAA eliminates
the New Lease program,
which received $250,000 in the
Legislature’s FY 2018 budget. New Lease would have matched
homeless families, living in hotels and motels, with housing and
support services to remain housed over the long term.

The FY 2018 GAA includes
$650,000 for Secure Jobs
Connect, which provides employment and housing
stabilization services to low-income families who receive housing
assistance through DHCD.

The FY 2018 GAA provides a
total of $47.2 million to help homeless
individuals, including $2.0
million for the Home and Healthy for Good program that helps
chronically homeless individuals remain housed. While this total is
$405,000 more than the FY 2017 budget, it is $570,000 less than the
amount recommended by the Legislature. The Governor vetoed funding for
specific programs included in the two accounts.

The FY 2018 GAA provides
$750,000 for the expansion of the
housing courts, which is $250,000
less than the Legislature’s budget. The Governor noted in his
veto message that he was reducing funding to the amount he deemed is
necessary to expand the housing courts to cover all regions of the
state.

For information on funding
for all housing programs going back
to FY
2001, please see MassBudget’s Budget Browserhere.

Economic
Development

Economic development programs
aim to strengthen our
state’s
workforce, support community investments, and stimulate economic
activity. The Fiscal Year (FY) 2018 General Appropriations Act (GAA)
funds economic development at $128.0 million, reflecting $15.7 million
in vetoes by the Governor. Total funding is essentially level with FY
2017.

The GAA establishes a new
$250,000 program, Learn to
Earn, which aims
to train and place unemployed and underemployed individuals in jobs in
high-demand fields through partnerships between public agencies,
businesses, community-based organizations, and career centers. The
Governor’s FY 2018 budget proposal introduced this program.
Originally, this account is funded at $1.0 million, however, $750,000
is transferred from Learn to Earn and into the Workforce
Competitiveness Trust Fund (WCTF), which has similar
workforce
development goals. The remaining $250,000 for Learn to Earn funds new
programs that will address barriers to sustained employment, such as
child care and transportation costs. Collectively, these accounts are
$200,000 below FY 2017 funding.

Some highlights of increases
in the GAA include:

$10.7 million to YouthWorks,
the summer jobs program for at-risk youth, a $600,000 increase over FY
2017 funding. This total reflects a $300,000 veto to several local
projects.

$2.7 million to the Mass
Service Alliance for various workforce training programs
and services
in the state, a $1.3 million increase over FY 2017 funding. Total
reflects a $380,000 veto to local service projects.

Up to $10.0 million in
transfers from surplus funds, if there is a state surplus at the end of
FY 2017, to the Massachusetts Life Sciences Investment Fund.
(Additionally, up to $10.0 million would be transferred to the
Community Preservation Trust Fund as described in the section on
“Other Local Aid.”) The final accounting for the FY
2017 budget year will not be complete until the fall, but a substantial
surplus seems unlikely.

The budget also decreased or
eliminated funding for several programs
including the following:

$2.2 million decrease from FY
2017 to the Massachusetts
Cultural Council, which offers grants and
services to nonprofit cultural organizations, schools, communities, and
artists in Massachusetts, bringing total funding to $12.1 million. The
Governor vetoed $1.9 million from this account, which is reflected in
the funding total, citing limited projected revenues.

The Governor vetoed $500,000
in proposed funding from the Big
Data Innovation and Workforce Fund and
$1.0 million from the Mass
Manufacturing Extension Partnership
(MassMEP), eliminating funding for both accounts. The Big Data
Innovation and Workforce Fund brings the public and private sectors
together to prepare workers for big data careers and help identify and
solve technology-based issues in transportation, public health, energy,
and other areas. MassMEP, also a collaboration of government, business,
and academic partners, helps manufacturers in the state plan and
implement strategies for increased competitiveness.

For travel and tourism, the
GAA funds the Mass.
Office of Travel and
Tourism (MOTT) at $6.6 million. This total reflects a
$6.8 million veto
as well as a $4.0 million transfer from the Tourism Trust Fund.
For the
Regional Tourism Council
Grants, the GAA provides $6.0 million. This
total comes entirely from the Tourism Trust fund. The current statute
transfers a total of $10.0 million in room occupancy tax revenue (from
hotel room taxes) to the Massachusetts Tourism Trust Fund and
distributes 40 percent of this funding ($4.0 million) to MOTT and 60
percent ($6.0 million) to the Regional Tourism Councils.

For information on funding
for all economic development
programs going
back to FY 2001, please see MassBudget’s Budget Browser here.

LAW
& PUBLIC SAFETY

Law and public safety
programs include the court system and
indigent
defense, prosecutors, state prisons and county sheriffs’
departments, probation and parole functions, as well as the military
division, fire safety services, and various other safety inspection
services. The Fiscal Year (FY) 2018 General Appropriations Act (GAA)
funds law and public safety accounts at $2.70 billion, reflecting $9.0
million in vetoes by the Governor. Total funding is $57.4 million (2.1
percent) lower than FY 2017 funding levels. Some or all of this gap may
be covered by a new reserve account, discussed below.

Many law and public safety accounts, including funding for sheriff’s departments
and private counsel
compensation (PCC) for indigent persons are often
underfunded in the annual budget and typically receive
significant mid-year funding. In recognition of this, the
Legislature established a new Caseload
and Deficiency Reserve account of $104.1 million that can
be used to supplement funding for, among other items, the sheriffs and
PCC accounts. When signing the FY 2018 GAA, the Governor proposed an
additional $94.1 million be added to this reserve
account—which, if approved, would bring the total amount in
this reserve account to $198.2 million. This is the total amount of
deficiencies the Administration estimates the sheriffs, PCC, and
several other areas of the budget will have throughout FY 2018.

Overall, the
sheriff’s departments have $17.6 million less in
direct funding allocations compared to FY 2017 spending levels, but the
Administration estimates that the sheriff’s departments are
underfunded by a total of $45.3 million. In order for the
sheriff’s departments to secure the additional mid-year
funding from the abovementioned reserve account, they must submit a
report explaining their cost reduction and efficiency efforts, as well
as provide a detailed breakdown of how the additional funds will be
spent. The PCC and related indigent persons court fees accounts are
currently underfunded by over $60.0 million when comparing FY 2017
current spending to the FY 2018 GAA budget. These shortfalls are
expected to be covered by the Caseload and Deficiency Reserve account,
if the Governor’s supplemental funding is passed. Best
budgeting practices would encourage including the full, anticipated
cost for all programs as part of the annual budget, rather than
assuming supplemental appropriations will be provided mid-year,
however, this funded reserve account is a step in the right direction.

The most significant increase
over last year is an additional $18.0
million for the
Department of Corrections (DOC), which the Legislature
suggested and the Governor kept mainly in place, aside from vetoing a
$125,000 earmark to monitor and document the reform
efforts made at the Bridgewater State Hospital, a
medium-security prison and mental health facility.

For information on funding
for all law and public safety accounts going
back to FY 2001, please see MassBudget’s Budget Browserhere.

LOCAL
AID

General local aid helps
cities and towns fund vital local
services such
as police and fire protection, parks, and public works. For more
information on general local aid, please see Demystifying
General Local
Aid in Massachusetts. The Fiscal Year (FY) 2018 General
Appropriations
Act (GAA) allots $1.06 billion for Unrestricted
General Government
Local Aid. Also known as UGGA or “general local
aid,” the amount is an increase of $39.9 million over FY 2017
levels.

The Commonwealth’s
capacity to fund general local
aid has
been hindered by a series of significant state-level tax cuts during
the 1990s and 2000s combined with the Great Recession. While over the
past several years, general local aid funding has increased in step
with or slightly above inflation, it still remains 40.5 percent below
FY 2001 levels, when adjusted for inflation.

Other
Local Aid

The Commonwealth provides
other sources of local aid to cities and
towns for more specific purposes. The largest form of local aid is for
K-12 education, which is discussed separately in the K-12 Education
section. Aid for libraries is also discussed in its own section in this
Budget Monitor.

The Governor vetoed $1.25
million in targeted local projects in the
Municipal Regionalization
and Efficiencies Incentive Reserve, bringing
the total from $11.5 million in the Legislature’s proposal to
$10.2 million in the FY2018 GAA. This is $1.25 million less than the
amount approved in last year’s budget, though $4.0 million
more than the current FY 2017 amount ($6.2 million) remaining after the
Governor cut the program’s funding in December. Most
remaining funds in this reserve are dedicated to four competitive grant
programs to promote municipal best practices.

Each legislative chamber
proposed a different approach to buttressing
funding for the Community
Preservation Act (CPA) Trust Fund. The CPA
Trust Fund provides state matching funds to municipalities that vote
for a targeted property tax increment to fund their own local account
dedicated to preserving open space, restoring historical buildings,
creating affordable housing, or developing outdoor recreation
facilities. State Registry of Deeds filing fees fund the CPA Trust
Fund. During the first years of the CPA, the state fund matched 100
percent of the revenue that municipalities raised themselves, but that
portion has fallen sharply in recent years. The fund may face
additional strains because eleven new municipalities, including Boston,
voted in last year to adopt the CPA. Rejecting the Senate’s
proposal to more than double the Registry of Deeds fee that supports
the Fund (from $20 to $45), the Legislature instead adopted the House
language, which provides the Community Preservation Act (CPA) Trust
Fund with up to $10.0 million in state surplus at the end of FY 2017,
if any consolidated net surplus occurs. The final accounting for the FY
2017 budget year will not be complete until the fall, but a substantial
surplus seems unlikely.

OTHER

Libraries

The state budget supports
local libraries, the Boston Public
Library
which serves as the primary research and reference service for the
Commonwealth, and other library programs in Massachusetts. The Fiscal
Year (FY) 2018 General Appropriations Act (GAA) provides $25.2 million
for libraries, which is slightly above the FY 2017 budget. The Governor
vetoed $250,000 in funding from the Legislature’s budget for
libraries. Even with a slight increase over FY 2017, funding for public
libraries has fallen by 49 percent since FY 2001 after adjusting for
inflation.

Among his vetoes, the
Governor eliminated funding for the Center
for
the Book, which received $200,000 in the
Legislature’s FY
2018 budget. The Center for the Book is a public-private partnership
that helps to advance reading and supports outreach for local
libraries.

For information on funding
for all library programs going back to FY
2001, please see MassBudget’s Budget Browserhere

Pensions

The General Appropriations
Act (GAA) budget follows the House
(and
Governor’s) recommended increase in the state’s
contribution to the Pensions Reserves Investment Trust (PRIT) Fund,
raising the annual contribution by $196.4 million over Fiscal Year (FY)
2017, to a total of $2.39 billion. Based on the recent update by the
Secretary of Administration and Finance to the state’s
five-year pension contribution schedule, the GAA budget also specifies
the increased contribution amounts to be made in FY 2019 and FY 2020.
(To read more about how PRIT contributions are calculated and about the
current schedule for paying down the state’s unfunded pension
liabilities, see MassBudget’s, “Analyzing
the
Governor’s Budget for FY 2018.”

Assets held and managed
within the PRIT are used to fund
future state
employee retirement costs. The funds in the PRIT come from three
sources: employee pension contributions, the state’s
contributions toward employee pensions, and the investment returns
generated from the PRIT. To learn more about the Massachusetts state
pension system in general, see MassBudget’s report
“Demystifying
the State Pension System.”

For information on funding
for all pension items going back to
FY 2001,
see MassBudget’s Budget
Browser, here.

Additional
Line Item Vetoes

In addition to the spending
accounts discussed above in the Budget
Monitor, the Governor made vetoes in the following
MassBudget
subcategories: Commercial
Regulatory Entities, Constitutional
Officers, and Other Administrative.

REVENUE
AND BALANCE

The Fiscal Year (FY) 2018
General Appropriations Act (GAA) reflects lawmakers’
deepening realization that, despite a reviving economy, state tax
revenue continues to grow slowly. In light of FY 2017 tax revenues
falling short of forecasts, the Legislature reduced its tax revenue
estimate for FY 2018 by $650 million. The decline would have been $83
million larger, but under existing law, the deteriorating revenue
situation likely will forestall a previously scheduled reduction in the
income tax rate from 5.10 percent to 5.05 percent. The Governor
projects that tax revenues in FY 2018 will now likely fall short by an
additional $99 million, thus leaving a $749 million gap between
spending in the Legislature’s budget and expected revenues
for the fiscal year.

Tax Revenue

The Legislature adopted “tax
modernization”
proposals much like those originally introduced by the Governor. These
deliver a mix of both one-time and ongoing revenue. The Legislature
agreed to a proposal by the Governor to have merchants remit sales
taxes daily rather than at the end of the month. This results in a
one-time increase in revenue of $125.0 million in FY 2018 (because the
state will receive thirteen months of sales tax revenue). The GAA also
relies on $59.0 million in net additional tax revenue, largely from
measures to improve compliance. A description of these tax
modernization measures can be read in MassBudget’s Budget Monitor
on the Senate Ways & Means Committee’s budget
proposal.

The Legislature did not adopt a number of Senate proposals for
additional revenues: higher taxes on flavored cigars, tighter
eligibility and salary caps for Film Tax Credits, and extending the
room occupancy tax to short-term rentals such as those made through
Airbnb (a version of which the Governor had also proposed).

The FY 2018 GAA also does not include the Senate’s proposal
for a Tax Expenditure Review Commission. This commission would have
been tasked with systematically reviewing many of the tax breaks
provided by the Commonwealth, as well as making recommendations about
whether to continue, alter, or eliminate each credit. (For more detail
on the growing cost of special business tax breaks in Massachusetts,
see MassBudget’s report here).

The Governor let stand the Legislature’s proposals for an
expansion of the Earned Income Tax Credit (EITC), making it easier for
married victims of domestic abuse to claim the credit without filing a
joint return with their spouse. Along with this change, the budget
limits the size of state EITC benefits for part-time residents and
eliminates access to the credit for nonresidents. The Legislature also
agreed to create a new business tax credit for employers that hire
qualified, Massachusetts-based veterans. (For more detail on these two
proposed tax credits, see MassBudget’s House Ways and Means
Committee Budget Monitorhere.)

Non-Tax Revenue

The FY 2018 GAA relies on a variety of non-tax revenues: federal
revenues, which are mostly reimbursements from the federal government
for state spending on Medicaid (MassHealth and related costs);
departmental revenues, which are fees, assessments, fines, tuition, and
similar receipts; and what are known as “transfer”
revenues, which include lottery receipts, revenues from the
newly-licensed gambling facilities, and funds that the state draws from
an assortment of non-budgeted trusts.

The FY 2018 GAA includes several non-tax revenue new to this fiscal
year, including:

$10.3 million in transfers to the General Fund from the
sale of abandoned property. In December, the Administration announced
it would be liquidating a large amount of stock and mutual funds. Mass.
General Law requires that 75 percent of abandoned property growth be
directed to the Stabilization Fund ($33.8 million in FY 2018), but the
remainder would be for the General Fund, and used in balancing the
budget.

$1.0 million in new fees assessed at the Department of
Public Health.

$42.5 million in additional federal reimbursement for
health safety net payments to community health centers, now approved
under the state’s new Medicaid waiver. Previously, payments
for uncompensated care to community health centers had been capped, but
Massachusetts recently received approval for this cap to be lifted. The
state anticipates $85 million in payments, which would bring in $42.5
million in reimbursement.

The FY 2018 GAA is also counting on $200.0 million from an assessment
on employers to help address growing public costs resulting from a
shift from employer-sponsored health insurance to publicly-funded
health insurance (MassHealth). The Legislature adopted a proposal
offered by the Governor in June that would increase the existing
Employer Medical Assistance Coverage (EMAC) to generate these revenues.
The Governor sent these provisions back to the Legislature with
proposed amendments that included that same $200.0 million EMAC
assessment along with other provisions to restructure MassHealth
eligibility and to reform the commercial health insurance market. (See
the MassHealth (Medicaid) and Health Reform section of this Budget Monitor for
a further discussion.) Because the Governor counts on this revenue to
balance the budget, we include that amount here, and because the
Governor’s proposal is to sunset the assessment in December
2019, we count it as temporary revenue.

There are some non-tax revenues that may become available over the
course of the year, but the amounts are unknown. Specifically, it is
very likely that by the end of FY 2018, the Administration will be able
to transfer (“sweep”) extra funds from a variety of
trusts, but the GAA is not counting on a specific amount of those funds
at this time.

Other Budget-Balancing
Strategies

In addition to the items described above, the Legislature and Governor
count on additional temporary solutions to balance the budget. They
provide $128.8 million less in funding for the State Retiree Benefits
Trust than is called for by existing law. (See State
Employee Health Insurance section of this Budget Monitor for
discussion.) Similarly, they deposit $51.5 million less in capital
gains tax revenues into the state’s Stabilization
(“rainy day”) Fund than current law requires.

Lawmakers also underfunded several accounts, for which the Legislature
will likely be required to appropriate additional funds in a
supplementary budget later in the year. Since there is a legal right to
shelter, and indigent defendants have a legal right to counsel in
Massachusetts, and since the Department of Transportation is
statutorily allowed to spend beyond budget to pay contractors for
addressing snow and ice removal, inadequate funding of these accounts
is typically made up for with substantial supplementary funding during
the year. Underfunding these and other accounts as part of the initial
appropriations process, however, can create sizeable--though
hidden--holes in the budget that would have to be filled as the fiscal
year moves ahead.

To address the underfunding of these accounts, the Legislature
created
a $104.1 million Caseload and Deficiency Reserve. The Governor
concluded that there were instead $198.2 million in underfunded
accounts, and proposed a supplementary budget of $94.1 million to
address these anticipated shortfalls.

In addition, the FY 2018 GAA assumes approximately $200 million from
“reversions,” money projected to be left over at
the end of FY 2018 in various accounts that can be reallocated
(“reverted”) back into the General Fund.

TOTAL
BUDGET BY CATEGORY
& SUBCATEGORY

In order to allow for more
accurate comparisons from year to year and to better include all
appropriated spending, MassBudget makes certain adjustments to the way
budget data are presented by the Administration and Legislature.

The totals in the Fiscal Year (FY) 2018 columns show funding in the
structure of the FY 2017 budget in order to allow for more accurate
across-year comparisons. For example, if the FY 2018 budget
consolidates several line items, using information provided by the
Administration, MassBudget “un-consolidates” the
total and re-distributes the amounts back into their original line
items in order to allow for more accurate across-year comparisons of
totals.

FY 2017 Current
column shows the budgeted General Appropriation Act as enacted in July
2016, and as amended by mid-year 9c cuts and by supplemental budget
legislation.

For other explanatory information, see details below the chart.

MassBudget’s totals include the “pre-budget transfers”
of funds. Statutes require that the Legislature transfer portions of
revenue prior to the appropriation process to support certain
functions. Although these transfers function no differently from
appropriations, the Governor and Legislature do not reflect these
expenditures in their budget totals; instead, they are shown as amounts
deducted or transferred from revenue prior to the budgeting process. To
better reflect total state funding, MassBudget includes these
pre-budget transfers in appropriation totals. In the
Governor’s, House, and Senate budgets in FY 2018, these
transfers add $4.3 billion to the total; in the Legislature’s
and GAA budgets the pre-budget transfers add $4.4 billion. These
transfers are: tax revenues dedicated to the MBTA and school building
assistance, cigarette excises dedicated to the Commonwealth Care Trust
Fund, the state contribution to the pension system, a transfer to the
State Retiree Benefits Trust, and transfers to the Workforce Training
Trust.

MassBudget’s totals include annual appropriations
into non-budgeted
(“off-budget”) trusts. The transfer of
funds from the General Fund or another budgeted fund into a
non-budgeted trust is a form of appropriation, and should be treated as
any other appropriation. Prior to FY 2011, the budget authorized these
transfers in Outside Section budget language. Starting in FY 2011, a
new section of the budget, Section 2E, systematically accounted for the
transfer of funds into off-budgeted trusts. MassBudget’s
totals include these operating transfers in all budget years.

When spending that is now included in the budget was
previously “off-budget,” MassBudget’s
totals include the prior years’
“off-budget” spending totals in order to reflect
more accurate
year-to-year comparisons. For example, funding directed to
health care providers as partial reimbursement for uncompensated care
was previously funded by a transfer of federal revenue directly into
the off-budget Uncompensated Care Trust Fund. This spending was brought
on-budget in FY 2009, and incorporated into the state’s
budgeted health care appropriations. MassBudget’s health care
budget totals include the off-budget spending for these services in
order to reflect a more accurate across-year comparison.

MassBudget reduces State
Employee Health Insurance totals to exclude spending on
health insurance for municipal employees and retired teachers for which
the state is fully-reimbursed by participating municipal governments.

MassBudget reduces funding for the community colleges,
state universities, and University of Massachusetts campuses by the
amount of tuition that these campuses remit to the state treasury each
year. These adjusted totals more accurately reflect the
“net” appropriations available to the campuses to
support operations, and allow for more consistent comparisons across
the years, since the policies about tuition
remission have varied from year to year and from campus to
campus. For example, until FY 2003, all of the University of
Massachusetts (UMass) campuses were required to remit to the state
treasury all tuition from all students. From FY 2004 – FY
2011, UMass Amherst (only) remitted only in-state tuition, and retained
tuition from out-of-state students. Starting in FY 2012, the remaining
UMass campuses were also allowed to retain tuition from out-of-state
students. Starting in FY 2017, all of the UMass campuses retained all
tuition revenue, remitting none. The MassBudget adjustments make it
possible to make meaningful comparisons of appropriations to these
campuses even with these policy changes.

MassBudget’s totals include funding paid for out
of anticipated reversions.
Reversions are appropriated funds that remain unspent by the end of the
year that are then returned to the General Fund. For example, a portion
of funding for health care for retired state employees has in some
years come from anticipated reversions of funds.

MassBudget’s totals reflect
legislatively-approved “prior
appropriation continued” (PAC) amounts. In most
instances, MassBudget shifts the PAC amount from the year in which the
funding was first appropriated into the year in which the
Administration expects to spend the totals.

Because MassBudget totals reflect budgeted appropriations
and not actual spending, there can be apparent fluctuations in the
MassHealth and Health Reform totals that are simply due to the timing
of payments to certain off-budget trusts. These budget variations may
not reflect real differences in spending.

Massachusetts Budget and Policy Center

15 Court Square, Suite 700 | Boston, MA 02108 | (617) 426-1228

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